Correlation Between Bajaj Healthcare and HCL Technologies

Can any of the company-specific risk be diversified away by investing in both Bajaj Healthcare and HCL Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bajaj Healthcare and HCL Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bajaj Healthcare Limited and HCL Technologies Limited, you can compare the effects of market volatilities on Bajaj Healthcare and HCL Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bajaj Healthcare with a short position of HCL Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Healthcare and HCL Technologies.

Diversification Opportunities for Bajaj Healthcare and HCL Technologies

0.03

Correlation Coefficient

Bajaj Healthcare  HCL Technologies

Significant diversification

The 3 months correlation between Bajaj and HCL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and Bajaj Healthcare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bajaj Healthcare Limited are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and HCL Technologies go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and HCL Technologies

Assuming the 90 days trading horizon Bajaj Healthcare is expected to generate 6.04 times less return on investment than HCL Technologies. In addition to that, Bajaj Healthcare is 1.89 times more volatile than HCL Technologies Limited. It trades about 0.01 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.08 per unit of volatility. If you would invest  177,890  in HCL Technologies Limited on September 5, 2024 and sell it today you would earn a total of  11,185  from holding HCL Technologies Limited or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  HCL Technologies Limited

Bajaj Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bajaj Healthcare Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bajaj Healthcare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HCL Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bajaj Healthcare and HCL Technologies

The main advantage of trading using opposite Bajaj Healthcare and HCL Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bajaj Healthcare position performs unexpectedly, HCL Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HCL Technologies will offset losses from the drop in HCL Technologies' long position.

The idea behind Bajaj Healthcare Limited and HCL Technologies Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.